AT&T and British Telecommunications are in serious talks about merging two of their biggest businesses.

Negotiations centre on combining the business services divisions of both companies into a stand-alone unit, along with a separate merger of their respective wireless businesses.

The deal would leave BT and AT&T to focus on their domestic consumer operations.

Such a move would effectively break both companies apart into separate consumer, business services and wireless companies. The far-reaching idea has been the subject of a spate of high-level meetings between executives from the US and British carriers in recent weeks.

No formal plan has yet been agreed, however, and a series of concerns about such a complex restructuring could derail the idea, according to one person familiar with the discussions.

Last night, BT and AT&T, one of the US's largest telecoms groups, declined to comment.

Mr Michael Armstrong, chairman of AT&T, is understood to have pushed hard for such a move as a way to revive both companies' flagging stock market fortunes.

AT&T's shares have fallen nearly 50 per cent over the past six months, prompting Mr Armstrong to initiate a wide-ranging review of its strategy.

Shares in BT - which bought Esat in January - have slipped nearly 50 per cent since the start of this year, despite a restructuring in April that was intended to restore confidence in the company.

BT executives are understood to be more cautious about the proposal than their US counterparts, however.

If the stock market did not issue a strong vote of confidence in the idea by pushing up BT's shares, it could leave the company vulnerable to an unwanted takeover, according to one person familiar with the talks.

Separate mergers of their business services and wireless divisions would effectively involve a break-up of both AT&T and BT.

Business customers accounted for $14 billion (€16.3 billion) of AT&T's $32 billion of revenues in the first six months of this year.

BT, meanwhile, has created a separate division, known as Ignite, to handle its fast-growing international data services.

Combined with Concert, an international joint venture set up by AT&T and BT at the start of this year, these operations would create a company focused on the international market for Internet and data services to rival established companies like WorldCom and upstarts like Global Crossing.

A merger of AT&T Wireless and BT's mobile business, meanwhile, would create a transatlantic operation with greater resources to build out third-generation mobile networks in Europe.

The high cost of buying new mobile licences has been one of the main reasons for BT's high debt load, which has cast a shadow over its stock price.

If the complex deal is completed, it would still leave both companies facing big challenges in their remaining domestic businesses, and could be followed by further restructuring. BT has floated the idea of separating its wholesale network operations from its retail business, effectively freeing itself from the onerous regulations that have hampered its growth.